Education and Economic Growth in Developing Countries: Empirical Evidence from GMM Estimators for Dynamic Panel Data

Wafa Sebki

doi:10.2478/eb-2021-0002

Abstract

Abstract The paper aims at studying the effect of education measured by enrolment ratios in secondary and higher education on economic growth measured by the rate of GDP growth in a sample of 40 developing countries during the period from 2002 to 2016 using the dynamic panel data estimators. The results of estimating the model of this study using the difference GMM estimator or what is known as the Arellano and Bond estimator showed that the proportions of those enrolled in tertiary education had a significant positive effect on economic growth, while the proportions of those enrolled in secondary education had a significant negative effect.

Highlights

The interest of economic theory in human capital issues is ancient, but this interest took a new dimension after the second World War, especially after it became clear that not all of the economic growth produced could be justified by the traditional production factors like labour and capital, but it went beyond considering the investment in human capital as an important factor in the formation of production, which was interpreted by many economists such as Solow (1957), Schultz (1961), Becker (1964) and others
The results showed that each of the ratios of those enrolled in primary education, the ratios of those enrolled in secondary education and the average years of schooling had a significant positive impact on economic growth
The author of the study has discussed the most important channels through which education affects economic growth, introduced the methodology used in the study by presenting both Arellano and Bond estimator (1991) and Blundell and Bond estimator (1998)

Summary

Introduction

The interest of economic theory in human capital issues is ancient, but this interest took a new dimension after the second World War, especially after it became clear that not all of the economic growth produced could be justified by the traditional production factors like labour and capital, but it went beyond considering the investment in human capital as an important factor in the formation of production, which was interpreted by many economists such as Solow (1957), Schultz (1961), Becker (1964) and others.Education at its various levels is considered one of the most effective means of achieving real development of human capital, as it is one of the essential elements of sustainable development and the improvement of human well-being. Given the strong positive relationship between education and access to higher levels of economic growth, developing countries have put education at the forefront of their concerns and have attempted to implement a set of policies to increase the stock of their educational capital. Enrolment rates in primary education improved significantly, moving in the category of low-income countries from 78 %. Economics and Business 2021 / 35 in 1999 (UNESCO, 2015) to 103 % in 2015 (UNESCO, 2017), while the total number of enrolments in secondary education witnessed a remarkable development from 26 911 000 in 1999 (UNESCO, 2015) to 35 274 000 in 2015 (UNESCO, 2017), while the total enrolment rate in higher education increased in the same category of countries from 3 % in 2000 to 8 % in 2015 (UNESCO, 2017). Taking into account the above-mentioned considerations, the following research question can be formulated: Does education increase economic growth rates in developing countries?

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Conclusion